Ofgem will release a full document in March. After a final consultation round Ofgem expects suppliers to voluntarily agree to the changes kicking in late in 2013 – or face binding new legislation.
Here are some of the key reforms suggested by the document:
Suppliers will not be forced to transfer customers en masse to other suppliers.
Suppliers will have to eliminate preserved (termed ‘dead’ in the release) tariffs that bring ‘no value’ and transfer these customers onto their cheapest variable rate.
All tariffs must have a standing charge and a unit rate. If so, then this may impact some smaller supplier whose tariffs are made up of just a unit rate. It is not crystal clear whether suppliers would be allowed to create tariffs with a Standing Charge and two unit rates.
Suppliers have to tell their customers on the bill what their cheapest tariff is.
Discounts appear to no longer form part of a tariff. Customers will be able to mix and match tariffs with discounts but the documents offers no details on this.
And this is not yet clear:
Do suppliers have to offer the same tariff choice for all payment methods, incl. for prepayment meters? This is not explicitly stated in the document, but is potentially important as it may have big implications on tariff choice for traditionally more expensive payment methods, such as prepayment, where suppliers have generally not been eager to compete. The same question applies for fuel types – do suppliers have to make all their tariffs available as dual fuel, gas and electricity tariffs?
Tariff proliferation may not really end if customers are asked to mix and match discounts with tariffs and have the choice of all fuel types. The number of tariffs and tariff variations could potentially explode further. It is not yet clear how this will work.
Our preliminary conclusion is:
Customers will still have to compare supplier tariff deals against each other – nothing in the document suggests that energy suppliers will have to do this job for them.
We see no incentive for suppliers to offer cheap variable rates.
The market will shift in a big way to fixed rate deals.
What has been said?
In answering a question about rising gas prices, Mr Cameron told MPs “I can announce that we will be legislating so that energy companies have to give the lowest tariff to their customers.” It is understood that the announcement arose from the Prime Minister’s concern that energy suppliers were ignoring requests to offer lower prices voluntarily. Continue reading →
Ofgem today (14 October 2011) issued its latest Electricity and Gas Supply Market Report. The report calculated that the net margin on supplying a typical, standard tariff dual fuel customer over the next year would be £125 per customer. This represents an increase of £110 from the previous figure of just £15 per customers and is driven almost exclusively by recent energy price hikes by energy suppliers. Continue reading →
Ofgem, the UK’s gas and electricity regulator has today launched an investigation into four energy suppliers (npower, ScottishPower, Scottish and Southern Energy and EDF Energy) to determine whether they are complying with new obligations to prevent mis-selling. The investigation covers not just doorstep selling, but also the telesales activities of these companies.
In 2008, Ofgem undertook an investigation into the functioning of the UK’s domestic and small business gas and electricity markets (the Energy Supply Probe). A survey for Ofgem’s probe showed Continue reading →
From today (18 January 2010) energy suppliers will need to provide customers with written estimates before any direct sales are concluded. This is designed to help customers compare the tariff they have been offered with their current deal.
The move comes in response to Ofgem’s Energy Supply Probe. A survey for Ofgem’s probe showed that more than one in two people switching did so in response to contact with a salesperson. However, the survey found that many who switch on the doorstep inadvertently move to more expensive tariffs perhaps because they are misled or unable to accurately compare tariffs. Staggeringly, the Ofgem survey found that 48% of gas switchers and 42% of electricity switchers ended up paying more as a result of a direct sales approach. Even worse, the survey found that vulnerable and prepayment meter consumers are more likely to switch via this route and so were particularly disadvantaged. Continue reading →